Project management is Profit management

During my project management program last week, I could tell by the managers’ questions that the company’s profits were in trouble.

What’s the connection? Problems at the front line show up in the bottom line. Manage the first, and you can count on the second to fall within range. If not, then you can see trouble coming.

The first question sounded like a “different cultures” issue. Vendor personnel in another country promised to meet the deadlines, but then didn’t for one reason or another. They required more time to get the work done.

On a time-and-materials contract, more time meant more money, so the managers went beyond budget to complete the work. Those extra funds had to come from somewhere.

The second question took on the denial of “that’s not my job, that’s procurement’s job”. The subject matter experts in the room didn’t understand why they had to write the statement of work. Because the vendor was performing to a contract, the SMEs said the writing duty belonged to the legal or contracting folks down the hall.

They didn’t realize that those specialists aren’t experts in engineering, IT, business systems, professional services, or software development. Without the SMEs input, the entire contract was being shaped after award by expensive change orders from the vendor.

Money for those changes wasn’t in the original budget. So where did the additional dollars come from?

Multiply these situations by the many projects under way every year, and you can see those questions indicate big hits to the company’s bottom line. Because of problems with contract types, leverage points, penalties, complete definition of work, relationships, and controls, the company was paying on the back end for poor project planning on the front end. The mismanagement of those projects meant they would likely miss their quarterly profit targets.